We'd all like to think that the Great Recession has taught us a
lesson about the dangers of overspending. In the spirit of saving
money, a couple of new terms have entered the popular lexicon:
deleveraging (a fancy word for paying off debt) and the new
frugality. More than two-thirds of those interviewed for our
Thrivent Financial/Kiplinger Survey of Family
said they had become more frugal over the past year.
So now that Americans seem to have become disciples of thrift,
I'm often asked whether I think the conversion will stick. My gut
tells me no.
I hope that we'll be more financially responsible and cautious
about getting into debt. A recent TransUnion study showed that the
average debt per credit-card holder was $5,165, down from $5,776 a
year ago (though a chunk of that probably represents bad debts
charged off by card issuers). Also down: late payments and serious
delinquencies on credit cards. The savings rate, once flirting with
zero, recently inched up to between 3% and 4%.
But I suspect this new frugality reflects consumers' desire to
bring their finances back to an even keel rather than a sea change
in their behavior. In the Kiplinger survey, for example,
respondents were less concerned about credit-card debt today than
they were two years ago.
In their heart of hearts, Americans seem born to spend. Even
after a severe recession and, thus far, a fragile recovery,
spending actually picked up in recent months. It's as if consumers
are looking for a reason to hit the mall. Kiplinger contributing
economist Richard DeKaser, author of our
Practical Economics column
, notes that as housing prices stabilized and stock prices
recovered over the past year (at least until the latest market
turbulence), households recouped some of the wealth that evaporated
between 2007 and 2009, bolstering consumer confidence. Economist Ed
Yardeni, of Yardeni Research, has calculated that despite the
ailing job market, real compensation per worker (including wages,
salaries and benefits per payroll employee) has been hovering at
near-record highs -- another potential confidence booster.
And you can't ignore consumers' hate-love relationship with
credit cards -- hate the fees and high interest rates but love the
convenience of using plastic to buy iPads and HDTVs. Credit
standards may be tighter, but credit-card solicitations are up.
Even my 21-year-old son is getting offers.
Wired to spend?
To top it off, there's evidence that we may be preprogrammed to
shop. Researchers at Carnegie Mellon University have discovered
that the prospect of buying something appealing triggers a response
in a part of the brain that's associated with pleasure -- and the
prospect of paying a high price triggers a response in a part of
the brain that registers pain.
One thing there's no doubt about: Everybody loves a bargain.
Surveys show that more consumers are shopping at value-oriented
retailers, and they're buying more items on sale.
Our cover story this month gives you 64 of
the best deals we could find
-- rock-bottom values on everything from stocks and mutual funds to
cars, tech and travel. And here's a thought: After you steal one
(or more) of these deals, take the money you saved and stash it in
your emergency fund or IRA. You'll help both the economy and your
personal balance sheet.
P.S. If exchange-traded funds aren't part of your investment
mix, they probably should be. See our special report for
strategies on how to use ETFs
to build a core portfolio, make a tactical bet or even cut your